Unfair tax liens may cause bad credit

Between your credit card bill, car loan and everyday expenses, you may find you don't have much money leftover to pay your income taxes.

So what happens if you can't afford to pay the Internal Revenue Service this year?

If you file without submitting payment, you will likely receive a 6 percent interest charge on the balance you owe, as well as a late penalty, which is typically about 0.5 percent on top, The Associated Press reports.

What you want to avoid is ignoring the tax agency altogether and hoping the balance will just disappear. If you take this approach, after three months the IRS may place a lien on your account, which can result in bad credit.

If you have a healthy credit score, and suffer a tax lien, you could lose as many as 160 points off of your FICO score, the report said. With such a major hit at stake, even if you pay your income taxes in full, you may want to check your credit report to make sure it accurately reflects your payment history.

In some instances, the IRS may place a lien on your account by mistake. If you find yourself in this position, you may want to contact a credit lawyer to help you investigate and dispute the unfair mark. He or she may be able to work with credit bureaus on your behalf to explain why the item is a mistake and should be removed from your records.